Genac Properties JHB (Pty) Ltd v NBC Administrators CC (Previously NBC Administrators (Pty) Ltd)

• Jurisdiction: South Africa
• Citation: 1992 (1) SA 566 (A)

Genac Properties JHB (Pty) Ltd v NBC Administrators CC (Previously NBC Administrators (Pty) Ltd)
1992 (1) SA 566 (A)

1992 (1) SA p566

Citation	1992 (1) SA 566 (A)
Court	Appellate Division
Judge	Botha JA, Hefer JA, Milne JA, Van den Heever JA and Nicholas AJA
Heard	November 12, 1991
Judgment	November 29, 1991

Flynote : Sleutelwoorde

Landlord and tenant — Lease — Validity of — Clause in lease providing that 'landlord's maintenance and running expenses', listing eight specific categories thereof with a ninth being 'an amount not exceeding 5% of the aggregate of all the aforegoing . . .' to be paid in monthly payments by tenant to landlord — Clause defining such expenses as 'the G landlord's actual and reasonable maintenance and running expenses' — Previous clause providing for payment of stipulated rentals — Contention raised that maintenance and expenses clause void for vagueness as amounts payable in terms thereof not determinable with H reasonable certainty — Word 'reasonable' in clause used in relation to actual expenses and such use not creating uncertainty as actual expenses readily ascertainable and question whether they are reasonably capable of objective ascertainment — Although amount of expenses within control of landlord, expenses having to be reasonable in their nature and amount I — Such to be objectively ascertained and is not subject to will or whim of landlord — Thus not correct that landlord determines amount of expenses — Provision for addition of a surcharge in 'an amount not exceeding 5% of the aggregate of all the aforegoing expenses . . .' construed in favour of validity as meaning that agreed rate for surcharge was 5% but that landlord free to apply a lower percentage if J he wished — Maintenance and expenses clause

1992 (1) SA p567

A not void for vagueness — Lease accordingly valid — Semble: Difficult to see on what principle a sale for a reasonable price or a lease for a reasonable rent should be regarded as invalid.

Headnote : Kopnota

In terms of lease entered into between the appellant, as landlord, and the respondent, as tenant, clause 5 provided for the payment of rental 'as set out in the table below', the table setting the rentals for each B of the five years in which the lease was to endure. Clause 6 provided that 'the landlord's maintenance and running expenses' were to be paid by the tenant monthly in advance in an amount equal to 11,3% of the landlord's estimate of the monthly maintenance and running expenses, provision also being made for the payment of additional amounts by the tenant or refunds by the landlord should the landlord's estimate be incorrect. The 'landlord's maintenance and running expenses' was defined C in clause 6.1 as meaning 'the aggregate of all the landlord's actual and reasonable maintenance and running expenses . . . in respect of the property and the building . . . including, without limiting the generality of the aforegoing' and the clause then listed eight specific categories of expenses, ending with a ninth item, 'an amount not exceeding 5% of the aggregate of all the aforegoing expenses and costs'. The landlord instituted an action in a Local Division claiming, inter alia, an amount for 'maintenance and running expenses as defined in the D agreement'. In its plea the tenant pleaded that the lease was void for vagueness in that, inter alia, 'the plaintiff's maintenance and running expenses as defined in clause 6.1 . . . cannot be determined with reasonable certainty'. The Local Division upheld the tenant's contentions and dismissed the claim. In an appeal the tenant supported the Local Division's judgment, contending (a) that, having regard to the use of the word 'reasonable' in clause 6.1, the quantification of the E individual expenses enumerated in clause 6.1 was left entirely in the air and could not be determined with reasonable certainty; (b) that the amount of the expenses had been left to the landlord for it was the landlord who determined in its sole discretion precisely which expenses would be incurred and, whether or not the landlord acted alone or with third parties, the tenant had absolutely no say in the selection of such third parties or the eventual amount of the expenses to be incurred; and (c) that the item in clause 6.1 providing for the surcharge of 5% on the aggregate of all the aforegoing expenses and costs' left the F determination of the ultimate amount of the expenses component to the discretion of the landlord which he could exercise 'capriciously without reference to any ascertainable factors or to an external standard' thus rendering the clause invalid. It was contended for the landlord, however, that on a proper construction of the provision the agreed rate of the surcharge was 5%, but that the landlord was free to apply a lower percentage if he wished. G

Held, as to (a), that the word 'reasonable' was used in relation to the actual expenses, and its use in that context did not create uncertainty: the actual expenses were readily ascertainable from the landlord's financial records, and whether they were reasonable was also capable of objective ascertainment.

Semble: It is difficult to see on what principle a sale for a reasonable price, or a lease for a reasonable rent, should be regarded as invalid. H

Held, further, as to (b), that there were two qualifications to the landlord's right to determine the amounts recoverable under clause 6: the first qualification was that the expenses should actually have been incurred; and the second qualification was that such expenses should have been reasonable, that is reasonable in relation to both the nature of the expenses and their amount.

Held, further, that the reasonableness of the expenses was to be objectively ascertained and was not subject to the will or whim of the landlord.

I Held, accordingly, that it was wrong to say that under clause 6 the landlord determined the amount of the expenses.

Held, further, as to (c), that, if the provision in question was reasonably capable of the interpretation contended for by the landlord, that interpretation was to be preferred to one which would render the lease invalid.

The dictum in Soteriou v Retco Poyntons (Pty) Ltd 1985 (2) SA 922 (A) at J 931G-H applied.

1992 (1) SA p568

A Held, further, that, adopting such approach, the construction urged by the landlord was to be preferred.

Held, accordingly, that the lease was valid and enforceable. Appeal allowed.

The decision in the Witwatersrand Local Division in Genac Properties Jhb (Pty) Ltd v NBC Administrators CC (previously NBC Administrators (Pty) Ltd) reversed. B

Case Information

Appeal from a decision in the Witwatersrand Local Division (Cilliers AJ). The facts appear from the judgment of Nicholas AJA.

L I Goldblatt SC (with him G E Turner) for the appellant: The requirement of certainty in contracts means that the rights and duties established by a contract must be defined in such a way as to render the contract enforceable at the instance of the Courts. Patel v Adam 1977 (2) SA 653 (A) C at 666; Farlam and Hathaway Contract 3rd ed at 314 and the authorities cited therein; Christie The Law of Contract in South Africa at 85-90. The first issue to be decided is whether clause 6 of the agreement leaves it to the lessor alone to decide what amount he wishes to recover from each lessee at the end of each financial year, with the result that a court of law would not be able to determine this D amount. The learned Judge a quo, after consideration of the meaning and effect of clauses 6.1, 6.2 and 6.3 of the agreement, stated as follows: 'The aforegoing suffices to indicate that, subject to the lessor actually incurring the expenses and that they be reasonable, the lessor can without reference to the lessee determine the amounts recoverable under clause 6.' The learned Judge erred in finding that the lessor can E without reference to the lessee determine the amounts recoverable under the lease. The amounts recoverable in terms of the lease are fixed and certain. They are the 'aggregate of all the landlord's actual and reasonable maintenance and running expenses . . .'. It is clear therefore that the landlord is only entitled to recover those amounts actually expended by it in the maintenance and running of the building. F The only aspect which is left to the landlord alone to decide is which of the many categories of costs in the maintaining and running of the building it will actually incur. Even this decision is not entirely unfettered since the actual expenses incurred by the landlord as well as the decision to incur such actual expenditure on a particular item of G maintenance must be 'reasonable' as well. The concept of 'reasonableness' is a well recognised concept in our law and has frequently been stated to be a matter that can be objectively tested. Reasonableness means 'considering the matter as a reasonable man normally would and then deciding as a reasonable man would normally H decide', per Watermeyer CJ in Vanderbijlpark Health Committee v Wilson 1950 (1) SA 447 (A) at 458; Herbert Porter & Co Ltd and Another v Johannesburg Stock Exchange 1974 (4) SA 781 (W) at 790 in which it was stated that reasonableness is an objective test. Furthermore it is important to note in this regard that the 'actual' expenses incurred by the landlord can never, in each of the categories of expenses set out in clause 6.1, be solely determinable by the landlord since the third I parties, towards whom the landlord incurs obligations in respect of the services of maintenance and administration of the premises, will themselves determine the amounts for which the landlord can obtain such services. This aspect was raised by the learned Judge a quo but the learned Judge nevertheless concluded that it was the lessor who solely determined the amount...